Gasoline: Market down on backwardation and expected supply recovery

The differential for MR-size cargoes of 93RON on an FOB Taiwan basis and that for MR-size cargoes of 92RON on an FOB Japan basis were pushed down by deep backwardation in the Singapore futures market and an expectation that supply would recover. In the spot talks, one MR-size cargo of 92RON gasoline loading at the end of December was traded at a premium in the low $1's/bbl to Singapore 92RON gasoline quotations on an FOB Japan basis.

In Southeast Asia, Pengerang Refining and Chemical (PRefChem) was reported to possibly resume operations of its residue fluid catalytic cracker (RFCC) in early December.

Indonesia state-owned Pertamina was scheduled to start trial runs of its new 90,000 bbl-per-day (b/d) RFCC at the 360,000 b/d Balikpapan refinery in mid-December. The operational rates of the secondary unit were expected to be around 50%.

Naphtha: Market bearish with lower run rates and LPG use

The differential for the first-half January became bearish on a CFR Japan basis. A sense of ample supply emerged while demand was weak. Because of declining production margins, several petrochemical companies mainly in South Korea decided to reduce the operational rates of naphtha crackers. In the meantime, considering soft market sentiment for aromatics, LPG tended to be used as petrochemical feedstocks. This trend pushed down demand for naphtha.

Japan's Mitsubishi Chemical bought 25,000mt of open-spec for delivery in the first-half December at a premium of less than $5/mt to Japan quotations on a CFR basis.

In the Middle East, Qatar Energy (QE) struck supply term contracts in the quarter to March next year with traders and end-users. The differential was pushed up by around $10/mt from that in the previous quarter.

Middle distillates: Both market prices down on backwardation

The differentials for MR-size cargoes of jet fuel became bearish in Northeast Asia on week. Buying interest for cargoes loading in the second half of December was retreating as the Singapore paper swaps market formed the backwardation structure. S-Oil Co in South Korea sold an MR-size cargo loading on Dec 27-31 through a tender closed on Tuesday at a premium of over $1.00/bbl to the quotations on an FOB basis. The cargo was expected to be headed to the US. The oil company had initially been expected to focus on term supply of kerosene. However, it was likely that it finally sold jet fuel due to its high profitability.

The differentials for 0.001% sulfur gasoil were pushed down as well because of the backwardation structure in the Singapore futures market.

The differential for LR-size cargoes of 0.001% sulfur gasoil on an FOB Middle East basis was at a premium in the range of $4.50-4.70/bbl to Middle East quotations, unchanged on week. Exports of middle distillates from the region were limited. In Saudi Arabia, Saudi Aramco would shut down a part of units at the 305,000b/d Sasref refinery in Jubail until Dec 14, and Saudi Aramco Total Refining and Petrochemical Company (SATOPR) would shut down the 465,000b/d refinery until Dec 2 for regular maintenance activities. Thus, supply from both refineries was limited.

Meanwhile, in Europe, one of the main markets for Middle Eastern cargoes, futures prices fell sharply. Ukrainian President Zelenskyy stated on Thursday that he would work with the US to advance efforts toward achieving peace with Russia. If the peace negotiations would move on, economic sanctions on Russian oil products could be eased, exports of oil products from the country would increase. That could alleviate supply concerns in the world.

Fuel oil: sales surface from SE Asia, buying interest remains poor

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. Buying interest for low-sulfur fuel oil was poor in Asia. On the other hand, some sales were seen from Southeast Asia in part due to malfunctions of refineries or repair works of secondary units. However, a market source said that it would be hard to find outlets even though traders would buy cargoes, so that they were reluctant to procure cargoes. Inquiries for China looked limited. Pengerang Petrochemical Company Sdn Bhd (PRefChem) in Malaysia might sell low sulfur fuel oil loading at the end of November. PRefChem was expected to postpone to restart operations of its RFCC until December.